How Plan Sponsors Can Help Bridge the Gender Gap in Retirement SavingsApril 23, 2018
Research has shown that women are more likely to have less money saved for retirement than their male counterparts. Read on.
The wage gap between men and women in America has been a topic of discussion for decades, but what doesn’t receive as much attention is the impact of the gender wage gap on retirement savings. A recent study by the Center for Retirement Research revealed that women in America have an 80% higher risk of entering poverty during their retirement years than their male counterparts. And while the wage gap may be getting closer, the entrance of the millennial workforce has introduced many other factors that require consideration.
According to today’s statistics women save on average 2% less of their wages compared to men for their retirement, this in combination with the factors noted below has resulted in women, on average having 50% of the retirement savings of men. Among other reasons, the savings difference can sometimes be attributed to other factors such as work cycles. Women tend to have more breaks in employment, higher student loans, caregiving responsibilities and part-time employment than men which can lead to lower pay rates, reduced years in the workforce to save and longer timelines for reaching management positions. After taking a break in employment, 40% of women either took a significant pay cut after returning to work or found it difficult to find work.
A shocking 44% of millennial women spend more money on their morning caffeine fix than their retirement savings, while 68% of millennial women are not contributing to an employer sponsored retirement plan. A $5 a day savings over 40 years could provide a retiree, on average, over $500,000 in retirement benefits.
So what can you do as a Plan Sponsor to ensure your employees have enough retirement savings to retire comfortably?
- Education is key - A great way to engage employees is to offer educational seminars and resources that help employees understand the importance of saving for their retirement. Quarterly onsite visits from an investment manager, monthly newsletters, on-line savings tools and a mobile app are great ways to keep retirement savings at the forefront of employee’s minds.
- Make enrolling easy - By enabling an automatic enrollment feature you allow your employees to receive the benefit of retirement savings from the day they are eligible to participate in the plan, which maximizes the employee’s savings potential. According to the IRS, retirement plans with an automatic enrollment feature have a 15% higher participation rate than those plans without the feature. Additionally, having an annual auto escalating feature will assist employees in continuing to increase their retirement savings.
- Practice what you preach - A great way to motivate employees to contribute to their retirement is to offer a matching contribution. Offering a matching contribution is also a great way to obtain and retain qualified employees in today’s competitive market.
- Equal opportunity - According to the United States Department of Labor women make up 64% of the part-time labor force, which often excludes them from important benefits like a retirement savings account. By offering matching contributions to part-time employees, employers can attract more qualified women candidates and increase employee retention.
We’re here to help. Contact us for more information. Our employee benefit plan specialists know how to explain the benefits of retirement savings in plain English and can help you ensure that your employees achieve their retirement goals.